Thu, Aug 08, 2019 - Page 6 News List

PNG asks Beijing to refinance debt

MONEY TALKS:China has never before bought another nation’s entire public debt, leading an expert to speculate that PNG’s true goal is to draw Australia’s attention


Papua New Guinea (PNG) has asked Beijing to refinance its US$8 billion debt, in a request likely to rile Australia and the US as they try to maintain their influence in the Pacific in the face of a rising China.

Less than two weeks after traveling to Australia on his first trip abroad as leader, PNG Prime Minister James Marape on Tuesday announced that he had during a meeting in Port Moresby asked China’s ambassador for help in refinancing the nation’s public debt.

“He stated that a formal letter would be forwarded to the ambassador to convey to Beijing on this request,” Marape’s office said in a statement. “He suggested that both the Bank of PNG and the PRC People’s Bank will take the lead with the Department of Treasury in ensuring that consultations are under way.”

Since becoming prime minister, Marape has vowed to combat endemic corruption at home and rebalance the nation’s relationships with allies and multinational companies exploiting PNG’s rich mineral resources.

According to the statement, Marape urged Beijing to enter into a free-trade agreement with Pacific island nations and suggested that China boost its investment in PNG’s forestry, fisheries and resources sectors.

Chinese ambassador to PNG Xue Bing (薛冰) raised concern over the upcoming Pacific Islands Forum leaders’ meeting in Tuvalu — which has diplomatic relations with Taiwan — and invited Marape to visit China, the statement said.

Lowy Institute Pacific program director Jonathan Pryke said that the request to Beijing, coming just after Australia rolled out the red carpet for Marape, would likely “ruffle feathers” in Canberra and Washington as they seek to counter China’s influence in the Pacific.

“If [China] were to restructure all of PNG’s debt, they would become the single largest creditor to PNG and that would give them a huge amount of leverage over PNG,” he said. “We’ve got no indication that China would be willing to do this, but if they did, I expect they would ask for some pretty firm concessions.”

Asked about the refinancing request, the Australian Department of Foreign Affairs and Trade said that it “welcomes support for the development needs of our Pacific partners ... provided it is transparent, upholds international standards, meets genuine need and avoids unsustainable debt burdens.”

China has not previously bought up another nation’s entire public debt, raising the possibility that PNG is using a calculated strategy to attract Australia’s attention, Pryke said.

“A way to get more interest, more engagement from Australia is to say: ‘China is willing to have this conversation with us,’” he said.

Cash-strapped PNG faces “significant economic challenges,” with interest repayments on the public debt, which stands at about 33 percent of GDP, making up 15 percent of the government’s annual expenditure, Pryke said.

Loans from China make up just more than 7 percent of PNG’s total debt, he added.

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